CEO Conversations — Appareo: The Next Generation

When David Batcheller took over for his father, Barry, as Appareo’s president and CEO last fall, it represented a changing of the guard at the Fargo-based electronics-and-software company not just in namec but in philosophy.

In this installation of “CEO Conversations,”Fargo INC! sat down with the Batchellers to talk about the company’s new business model, recruiting and economic development, and what it’s been like for father and son to work alongside one another for the past 15 years.

APPAREO: HOW IT ALL BEGAN

Appareo was founded in Fargo in 2003 by Barry Batcheller. Batcheller’s innovation, enthusiasm and deep understanding of emerging technologies allowed the company to help its customers become game -changers in their industries.

Appareo has grown to employ nearly 250 people across three locations, with an in-house manufacturing facility that is fully-equipped for prototyping and production.

Appareo has become the U.S. industry leader in general aviation weather-and-traffic radio receivers and supplies avionics and flight-safety devices to many of the world’s largest original equipment manufacturers and operators. In addition, they design and manufacture electronics —controls, sensors and display systems — for agricultural and construction OEMs.

David Batcheller, President & CEO

Since joining Appareo in 2005, David Batcheller has served as program manager; director of quality, process and program management; and COO. Now as president and CEO, David is responsible for the remote operations (Tempe, Arizona and Paris, France), engineering, manufacturing, finance and administrative components of Appareo’s business. David holds a degree from the University of Minnesota.

Honors

Top COOs in the Country (ExecRank, 2012)

Speaker (TEDx)

40 Under 40 (Prairie Business)

Guest speaker (Numerous conferences)

Barry Batcheller, Founder & Chairman of the Board

Barry Batcheller came to North Dakota from New York to study aerospace engineering and electrical engineering at North Dakota State University. He has more than 40 years of business experience and has been involved in the startup of six successful companies: IDA Corporation, Integrated Technical Systems Corporation, Phoenix International, Intelligent Agricultural Solutions, AFS and Appareo. He has also served as director of technology growth at John Deere.

Honors

ChamberChoice Entrepreneur of the Year Award (FMWF Chamber of Commerce, 2012)

1. APPAREO: THE OLD MODEL

a technical company making technical products

David Batcheller: In a very simple sense, it would look like we have an aviation business that makes radios and flight-data recorders and an agricultural business that makes controls and monitoring systems. That would be the most simplistic way to describe the business. I think it would also miss the magic and the things that make it possible to become a household name both regionally and globally. The surface-level, market-facing product side tells a sliver of the story.

Barry Batcheller: The businesses I have built over my 40-year career all have their genesis in providing advanced technologies to (companies) that incorporate those technologies into whole goods, and that model served us well. For example, at Phoenix International, we designed products for agricultural use. What we did was provide the technology and the commercialization of that technology to large original equipment manufacturers (OEMs). Like the computers in your car today, we did those for the big diesel engines that John Deere built.

A look inside Appareo’s manufacturing facilities, located in the North Dakota State University Research and Technology Park in North Fargo.

That model served us well for 40 years, where people would come to us with a need, and we would embody it into a technology product. They handled the sales, service, and marketing of the product, and we handled the technology and technology improvement. That model has changed under Dave’s leadership. As Dave has taken over the company, where it (previously) was a company focused on the creation of the products, Dave has changed the model into a business of businesses.

Dave’s model today is using the foundations of technology that we have put together — a pretty substantial engineering team, very substantial sales and marketing capabilities, a really good manufacturing group — and leveraging those assets into the creation of new businesses.

2. THE NEW MODEL

a business of businesses

David: Here’s a good way to think about our business: So you dig into some of these (companies) like Johnson & Johnson, Proctor & Gamble, and there’s this element of food science or chemistry or medical science that is embodied in everything (they make), from ACE bandages to BAND-AIDS to Neosporin. And these things are all sort of individual business lines or elements of a common capability or core. (General Electric) does it, too, but with a more strong and centralized brand presence; from washer/dryers to jet engines to light bulbs, they are in a broad cross-section of different markets and spaces, leveraging engineering and manufacturing expertise that’s shared.

Appareo has an engineering capability in electronics design, mechanical design, and software design; we have a real broad spectrum of technical capabilities; we have a research organization and research capabilities; we have manufacturing capabilities. And a lot of these capabilities can be (leveraged) for great opportunity and value in a number of different places. So rather than focus on being just an aviation business or just an agricultural business, we would like to leverage what are some really unique and special technical capabilities in more than one place in parallel.

We were curtailing the business’s potential. Taking our AI capabilities, which are already fairly substantial and have a lot of potential, and applying them only to one market is an underachievement. We can do better for our business and better for Fargo, so we would like to multi-thread these things if we can.

“The success of people and the success of businesses is, in a lot of ways, directly proportional to the number of uncomfortable situations they’re in.”

Barry: In the future, each of these businesses stands alone. So the department that handles sales and marketing, for example, now has to look at a more efficient, productive and generalized capability. The same situation is true of engineering; they become an engineering-services group.

So we have to up the game all across the business in order to be relevant to these companies that we’re charging with the responsibility to grow. And they’re taking that responsibility seriously.

It’s a pretty major overhaul. Even though the people and the areas of expertise remain the same, their charge has changed under this direction, and that’s a pretty major overhaul in the organization.

3. WHY CHANGE IS ESSENTIAL

and failure is tolerated

David: Change is difficult. I think that in any organization that’s undergoing change, there’s a certain innate resistance and aversion to change in people. But I think if you find yourself in a position where you don’t change for a long time, that’s an indication of stagnation.

Change is good. Change means growth, and growth is uncomfortable. But it’s absolutely necessary. The success of people and the success of businesses is, in a lot of ways, directly proportional to the number of uncomfortable situations they’re in.

People who are put in a lot of challenging situations grow personally and professionally. Businesses that (do) growth-challenging technology development and product development and have deployment challenges, they grow a lot.

Barry: And they make mistakes. I had a friend who had a plaque on the wall that said: Anyone who hasn’t had a failure is an amateur. There will be a number of failures in this exercise, and failing forward is perfectly okay. And we need to make sure that’s an attitude.

4. THE RECRUITING MISCONCEPTION

Fargo’s not an outlier

David: Recruiting is always a challenge … for everybody. It’s difficult to recruit great people. By definition, they’re a small portion of the available talent pool. We’re a small metropolitan area, so it’s a challenge to find talent. But I think identifying Fargo in that respect is super unfair to Fargo. I think it creates an environment and belief that we have a singular and unique challenge as a metropolitan area to find talent. We have an office in Phoenix, Arizona, and it’s the same problem. We have an office in Paris, France — same problem.

I think Fargo has a lot of businesses that are successful, and those businesses are competing for resources. And they’re competing for some of the same resources. So how does a business find great people? I think it’s less about finding and more about attracting. I don’t think you necessarily go find great people always by going out there and sifting through the résumés to discover greatness.

Fargo-based Appareo has become the industry leader in the U.S. in general aviation weather-and-traffic radio receivers. They also design and manufacture controls, sensors, and display systems for agricultural and construction original equipment manufacturers.

You do great things. You do really interesting stuff, stuff that has a strong resonance with the kind of people you’re trying to attract. And it brings them. It creates a draw.

And I think if you find spectacular people in one place, a lot of times, you can create a pull on their network. If you’re a talented person, you probably have talented friends. Then, your friends become interested in where you are and that creates a gravitational pull to your business that makes recruiting a different dynamic.

Barry: The other question you have to ask is: Who are you recruiting? There’s a lot of competition for the people with five to 10 years of experience. We have a large number of employees who are homegrown; we hire them green out of college.

The product produced by (North Dakota State University) is a really good product; it’s a highly recruited product. There’s the old question: Would you rather give birth or raise the dead? We give birth a lot.

Sometimes, you bring people in from organizations that are large corporate structures, and you end up raising the dead. Now, there are people who really do add spark to your company, but if you’re set up to be able to assimilate a larger number of new entries, you can really help grow these people into the type of people who fit your culture.

5. RETHINKING ECONOMIC DEVELOPMENT

ecosystems are magnets

David: We bleed talent. We’ve gotten better at it, but I think it’s an unrealistic objective for this metropolitan area to try and recruit coastal bodies to the northern reaches of the Midwest. I think if you have people who are from here and maybe didn’t move far, trying to bring them back to our community — based on a lot of the strengths of our community — is a more realistic endeavor than trying to draw a bunch of non-native people here.

The best thing would be to have them not leave, but I think there’s an opportunity to recruit people who are ready to come back to the community after a period abroad. A lot of times, I think a young person does their undergraduate here, and they leave for the bright lights of the city. A good thing would be to keep people here by having the kind of employment opportunities that outshine whatever the allure of the social opportunities would be in some of those other places — the kinds of professional opportunities and intellectual opportunities that make the city lights dim by comparison.

I think that if we want to be really successful long-term, we and others should endeavor to shine that bright.

“It’s an unrealistic objective for this metropolitan area to try and recruit coastal bodies to the northern reaches of the Midwest.”

Barry: If you go back to the early ‘80s in Fargo, there was zero to speak of in terms of electronics design and manufacturing. Today, there are thousands of employees who are derivative of Phoenix International and Appareo and John Deere’s work. We have created, over the past 30 years, an ecosystem, and it takes an ecosystem to create the type of magnet Dave is talking about.

If you have one small company that’s (producing) a unique technology, it’s difficult to attract a lot of people because they’re kind of married to that company. If you look at India, for example, people circulate between 50 companies, and they have no problem bringing people into that area because they feel free to move — that’s also what’s happening in Silicon Valley and New England.

When you get to Fargo, now that we’re creating this ecosystem where there’s a larger number of technology companies, people feel like they’re not stuck if something doesn’t work out. If they move to Fargo, they feel they can move around a little bit, and that’s helpful. What’s being built here is this technology-and-software infrastructure and ecosystem, which is a recruiting tool.

6. INFLECTION POINTS

find people who have been there before

Barry: Find some people who have been there before. In my experience, when you get to 20-40 people, it changes from being a really close-knit group of people where everybody kind of knows what’s going on to things moving more quickly and not everybody knowing what’s going on.

And some companies never make that transition. It just breaks apart. Similarly, when you get to 100, 150 people — we’re now pushing 250 — there are these stages of growth of revenue, growth of people, growth of markets, where you necessarily have to transform; you have to rethink the way you do business.

I would encourage startup businesses to seek an experienced group of people or an advisory board or just some people who have been there and can help you through it.

In addition to its Fargo facilities, Appareo has offices in Tempe, Arizona, and Paris, France.

David: I’ve always seen our challenges as more internal than external. I don’t want to trivialize selling and accessing market and producing business opportunity, but I think a lot of businesses that are really successful — CoSchedule, Myriad Mobile, there’s a bunch of others in town making a lot of success for themselves — I think the grander challenges are not: How do you find success? Rather, it’s: When you do, how do you really capitalize on it? How do you execute on realizing the potential of each opportunity?

If you’re trying to learn stuff all by yourself, it’s a tall order, and you end up making a lot of mistakes that many have made before and that you’d find to be very avoidable with the right help. With scaling, in general, find a great opportunity and once you begin to experience success, get a network of good help, be it an advisory board, a board of directors, people who can and are willing to donate a significant amount of their time to seeing your success.

7. LIKE FATHER, LIKE SON

candor is king

Barry: Dave and I have had a really good relationship since he was a very young child, and when we transitioned to the business, there wasn’t any pretense about it because we didn’t change the way we interacted with each other.

Dave has zero problem coming in and telling me exactly (what he thinks). As a matter of fact, a couple years ago, he came up to me and said, “It’s great that I’m chief operating officer, but I’m not doing anything because at every meeting you make all the decisions.” And I thought, “Is that true?” I realized it was and made a conscious effort not to do it. Over the years, Dave has had no problem coming and talking to me about stuff that’s working and not working, and I think we have a meaningful dialogue about it.

In all the things in my life, this has been by far the most enjoyable thing I have ever done — to work with Dave on a daily basis, to be able to collectively make decisions on growing this great business and the surprise, frankly, of having Dave turn out to be really, really good at it. And that’s the bigger thing. When you have an opportunity to work with someone who’s really good at it — better than I am, in many ways — that is very rewarding.

Since its inception in 2003, Appareo’s team has grown to nearly 250.

David: One of the nuances that people might not totally appreciate in a family business — and as a parent myself, I feel pretty comfortable saying this — is that what I’m doing at work is different enough that you can’t know me by only watching my behavior at home. That’s not enough to really know Dave. And the same is true for my father. I don’t think I would really know my father completely as a man if my interactions with him were only bringing the grandkids over for dinner and seeing him at holidays.

They say that we can only see so far because we stand on the shoulders of giants. Well, I have an enormous amount of personal and professional respect for my father; he’s a giant. It’s a very unusual thing for someone to be as accomplished as he is and as capable as he is. It’s nice to have an opportunity to spend time with family, but also my ability to really understand and respect all the things he’s accomplished and everything he’s capable of and learn from that, I don’t know how I could ever truly put a value on how important it will be to me forever.

I think these folks are building one of America’s great businesses. I think there’s a Hewlett Packard in the next 20 years here.

Barry: It was a very unique opportunity for Dave and I to work together. I do have a lot of experience, and I think the ability for us to be collaborative as we’ve gone through these inflection points and change — I’ve already been there. And so we can talk about them and adjust to them, and I think that’s really helped the business.

If it weren’t for Dave, we’d be in a position right now where the business would be for sale. If I had to go out and try to find a person like Dave to take this business to the next level and beyond — you call them purple squirrels. They’re really hard to find.

I wish I could be around in 25 years. I believe what was started here is the very beginning of this journey. I think these folks are building one of America’s great businesses. I think there’s a Hewlett Packard in the next 20 years here.